UPSC Prelims Practice Questions — RBI issues draft NBFC upper-layer review
Q1. Under the Reserve Bank of India's Scale Based Regulation (SBR) framework for NBFCs, which one of the four layers is ideally expected to remain empty unless the RBI takes specific supervisory action against an entity?
- A. NBFC-Base Layer (NBFC-BL)
- B. NBFC-Middle Layer (NBFC-ML)
- C. NBFC-Upper Layer (NBFC-UL)
- D. NBFC-Top Layer (NBFC-TL)
Q2. With reference to the Reserve Bank of India's Scale Based Regulation (SBR) framework, consider the following as named layers into which NBFCs are classified:
1. Base Layer
2. Middle Layer
3. Systemic Layer
4. Top Layer
Which of the above is/are correctly identified as layers under the framework?
- Base Layer
- Middle Layer
- Systemic Layer
- Top Layer
- A. 1 and 2 only
- B. 1, 2 and 4 only
- C. 3 and 4 only
- D. 1, 2, 3 and 4
Q3. The draft amendment Directions of 2026 proposing a flat asset-size threshold of Rs 1,00,000 crore for identifying NBFC-Upper Layer entities were issued by which wing of the Reserve Bank of India?
- A. Department of Regulation
- B. Department of Supervision
- C. Department of Payment and Settlement Systems
- D. Financial Stability Unit
Q4. With reference to the RBI's 2026 draft amendment Directions on NBFC-Upper Layer identification, consider the following statements:
1. It proposes replacing the earlier methodology with an absolute asset-size criterion of Rs 1,00,000 crore and above.
2. It proposes considering eligible Government-owned NBFCs for inclusion in the NBFC-UL list.
3. It proposes that the asset-size threshold be reviewed by the RBI every year.
4. Comments/feedback on the draft were invited from the public.
Which of the statements given above is/are NOT correct?
- It proposes replacing the earlier methodology with an absolute asset-size criterion of Rs 1,00,000 crore and above.
- It proposes considering eligible Government-owned NBFCs for inclusion in the NBFC-UL list.
- It proposes that the asset-size threshold be reviewed by the RBI every year.
- Comments/feedback on the draft were invited from the public.
- A. 3 only
- B. 1 and 3 only
- C. 2 and 4 only
- D. 3 and 4 only
Q5. Under the original (pre-2026) SBR methodology, how many eligible NBFCs, ranked by asset size, were mandated to always reside in the Upper Layer irrespective of the parametric scoring outcome?
- A. Five
- B. Ten
- C. Fifteen
- D. Twenty
Q6. Which one of the following entities named in the NBFC-Upper Layer list applied to surrender its Certificate of Registration to the RBI so as to avoid the mandatory stock-exchange listing obligation attached to Upper Layer status?
- A. Bajaj Finance
- B. Tata Sons
- C. LIC Housing Finance
- D. Muthoot Finance
Q7. Tata Sons was registered with the RBI as a Core Investment Company (CIC-ND-SI). In the RBI's framework, a Core Investment Company is best defined as an NBFC which:
- A. primarily holds investments in shares/debt of its group companies and does not trade in these instruments except for block sale
- B. primarily accepts public deposits and on-lends them to retail borrowers for housing
- C. primarily provides infrastructure debt financing through long-tenor bonds
- D. primarily undertakes factoring and bill-discounting for micro and small enterprises
Q8. By proposing to bring eligible Government-owned NBFCs within the NBFC-Upper Layer net for the first time, the RBI's draft directions are described as advancing which regulatory principle?
- A. An ownership-neutral regulatory approach
- B. A priority-sector lending mandate
- C. A ring-fencing of sovereign exposures
- D. A counter-cyclical capital buffer
Q9. The directions that would operationalise the inclusion of eligible Government-owned NBFCs into the NBFC-Upper Layer are issued and implemented by which authority?
- A. The Reserve Bank of India
- B. The Department of Financial Services, Ministry of Finance
- C. The Securities and Exchange Board of India
- D. The Department of Public Enterprises
Q10. With reference to the obligations triggered when an NBFC is classified in the Upper Layer, consider the following:
1. Mandatory listing — the NBFC-UL is required to get listed on stock exchanges within a stipulated period of its identification.
2. Common Equity Tier 1 (CET1) — the NBFC-UL must maintain a prescribed CET1 capital requirement.
3. Deposit insurance — deposits of an NBFC-UL become insured by the DICGC upon classification.
4. Large Exposures Framework — the NBFC-UL is subject to a large exposures norm.
Which of the above pairs of obligation and description is/are correctly identified?
- Mandatory listing — the NBFC-UL is required to get listed on stock exchanges within a stipulated period of its identification.
- Common Equity Tier 1 (CET1) — the NBFC-UL must maintain a prescribed CET1 capital requirement.
- Deposit insurance — deposits of an NBFC-UL become insured by the DICGC upon classification.
- Large Exposures Framework — the NBFC-UL is subject to a large exposures norm.
- A. 1, 2 and 4 only
- B. 1 and 3 only
- C. 2, 3 and 4 only
- D. 1, 2, 3 and 4
Q11. With reference to the regulation of NBFCs as compared with banks in India, consider the following statements:
1. NBFCs are regulated by the RBI under Chapter IIIB of the Reserve Bank of India Act, 1934.
2. NBFCs require a Certificate of Registration under Section 45-IA of the RBI Act, 1934.
3. Unlike bank deposits, deposits with NBFCs are not insured by the DICGC.
4. Like banks, NBFCs can accept demand (chequable) deposits and issue cheques drawn on themselves.
Which of the statements given above is/are NOT correct?
- NBFCs are regulated by the RBI under Chapter IIIB of the Reserve Bank of India Act, 1934.
- NBFCs require a Certificate of Registration under Section 45-IA of the RBI Act, 1934.
- Unlike bank deposits, deposits with NBFCs are not insured by the DICGC.
- Like banks, NBFCs can accept demand (chequable) deposits and issue cheques drawn on themselves.
- A. 4 only
- B. 1 and 4 only
- C. 3 only
- D. 2 and 3 only